Occam’s Razor

Is cash obsolete?

In my wallet is a bunch of crumpled greenbacks. In my pants pocket is a change purse bursting with loose change. Having cash in my pockets is as natural to me as fetching my newspaper in the morning.

Only fewer people are fetching newspapers these days. Instead, they are reading them online. The same thing may be happening with the greenback. While cash continues to feed a huge underground economy, (drug dealers just don’t take credit cards) for many of us cash is becoming unnecessary.

My daughter Rosie is this way. Her wallet is usually has no cash in it. In fact, she does not usually carry a wallet. Instead, she carries a little metal box for her handful of cards and documents. Since she got her checkcard a year or so back, except for an occasional bus fare, she has simply not needed cash. Every place she buys from has the ubiquitous card reader by the register. There is no pocketful of coins in her purse. One slim checkcard seems to be all that she needs.

I would say that she is the future but I think she is the here and now for those 25 and younger. (She is 18.) Money is becoming wholly abstract. I open my wallet and know with a quick glance how much I can afford for lunch. You see, the cafeteria in my building only takes cash, and ordinarily that is the only place where I still need cash. I cannot imagine the hassle of paying for gas with cash anymore. In fact, in many stores, cashiers are becoming obsolete. That is because they can save money by making you bag your own stuff at their fully automated registers. Moreover, since you are in a hurry, you are unlikely to stuff twenties into their bill machine. Slide your debit card in the slot, touch a few keys, get your receipt and you are out of there. It may not have that personal touch, but it is expeditious.

These days, I even use my ATM card to buy movie tickets. This is more due to the higher price of movie tickets than anything else is. Point in fact: virtually everything costs more. Hauling around change is becoming a pointless hassle. I am always getting pennies I neither need nor want. I religiously contribute them to the give a penny, take a penny jar by most cash registers. I do not want the hassle of hauling them around. My strategy does not seem to work very well. If it is not pennies, it is nickels, dimes and quarters instead. Of course, if you pay electronically, you do not have this particular hassle.

Granted, there are some drawbacks with using electronic money. One is that it is hard to keep track of how much money is left on an account. Yet my daughter does not consider this a drawback. When curious she goes online and checks her bank balance. She has no charge card so all of her transactions are on her debit/checkcard. Most debits these days clear within hours. She thinks my obsession with using check registers is rather quaint. In fact, if you download your transactions from your bank into a financial package like Quicken, you can see where your money went easily enough. It is generally easier to do this than to type them into a computer.

My daughter has a point, but then her financial life is very simple. She has no debts at all. So she does not have to worry about whether she is overdrawn. Me, I want a more intelligent card. It needs to be a smart card. Every time I make a transaction, it should store it on the card and keep my current balance on it. Ideally, it would recognize my fingerprint. When I pressed my fingerprint on it, it would tell me my balance and give me a way to scroll through my recent transactions. I keep waiting for a device like this but even though I wrote about this several years back, it is still not here. At least it is not available here in the States.

I am starting to realize that after our cafeteria remodeling is finished this summer, I will only need cash on the rare occasion that I use the toll road. Moreover, I really do not need it to pay cash for tools either, if I could get off my ass and get an E-ZPass.

One benefit of cash that I might miss if I were younger is its anonymity. The government should not be snooping into my financial transactions but I have a feeling they are doing it anyhow. Cash is a great way to hide certain transactions. Until we reach an age when we do not care, most of us men prefer to buy that latest copy of Hustler with cash. Should I be inclined to take some woman who is not my wife to a NoTel Motel, I probably would not charge it to my Visa either.

I have a feeling though that soon all our financial lives will be transparent. Cash is going the way of the horse and buggy. Soon we will be saving greenbacks so we can show our kids how money used to work. They will no doubt give us incredulous looks. Cyberspace is not real. Why should money be real? Besides, just how real is paper money? All it is is a government promissory note. The government is asserting that the face value of the money is worth what it says. It is not as if you cannot take it to your local Federal Reserve Bank and get gold bullion for it.

If we must go cashless, so be it. However, at least give us intelligent debit and credit cards. I realize that credit card companies in particular would fight this idea. They would prefer to keep us ignorant of how much we are spending. Someday though the Treasury Department will decide that printing all those greenbacks and minting all those coins is truly unnecessary in today’s modern world. Then maybe they will insist that banks and credit card companies give us all the sort of smart cards we need to make a cashless society useful.

Smugglers and dope pushers will not be happy of course. I have confidence though that they could find a way to circumvent any system that is created. People are ingenious when it comes to making a profit. In the unlikely event that we could not create an electronic system opaque to such transactions, I at least will not shed any tears. The benefits of going cashless are now obvious to me. It just needs a few tweaks so it will be obvious to all of us.

February 6th, 2008 at 09:49pm Posted by Mark | Technology | one comment

Why be happy?

Money cannot buy us love, the Beatles told us. Apparently, it cannot make us happy either. At least that is the conclusion of this article in today’s Washington Post.

A wealth of data in recent decades has shown that once personal wealth exceeds about $12,000 a year, more money produces virtually no increase in life satisfaction. From 1958 to 1987, for example, income in Japan grew fivefold, but researchers could find no corresponding increase in happiness.

I feel like the sirens should be wailing. Adam Smith should be rolling in his grave too. Could it be that our capitalist society is built on a foundation of sand? Wasn’t the whole purpose of gaining wealth for us to be happier? Would most of us really be happier, or at least as happy, grubbing at some minimum wage job and living in austere surroundings than we are in our McMansions with three cars in the driveway?

I am thinking of a man I see regularly where I work. I see him when I go home in the evenings. He is on the ground floor and he is pushing a wide broom across the tile floors. “Have a great evening sir,” he says to me without fail, with a big happy smile on his face. He is utterly sincere and the content sound in his voice is impossible to fake. Just down the hall a bit there is the guard I usually see in the morning as I enter our building. He is always exceedingly pleasant. He could even be described as perky. He is such a morning person. He greets me with a sincere, “How are you doing today, sir?” I always mumble something polite, but I just do not feel as full of life as he does. After he checks my badge, he tells me “Have a wonderful day,” and it is clear that he means it too. I say the same to him, and while I mean it intellectually, I do not feel it in my heart. I have other things on my brain other than how wonderful this guard’s day turns out. I head upstairs to my office to slog through a hundred or so emails. He hangs out in the lobby, checks badges and makes light conversation with the many people coming in and out. I have been admiring him for his contentment and wholeness, characteristics I still lack after 49 years. For this modest security guard also has something of a following among the women in the building. He flirts with them and they flirt back. He walks with a skip in his step. It is not that he is especially handsome; he is middle age like me. I suspect I make at least three times what he makes a year. Am I as happy as he is? I doubt it.

So here I am with my six figure income. Why am I not happier? I have been to Hawaii and enjoyed it immensely. In two days, I fly off to Paris with my family. That will make me even happier, right? I will have experienced more of this world. I do not know what kind of vacation, if any, the broom pusher in the lobby at work will be getting this year. I imagine pushing the broom is just one of two or three jobs that he is shuffling. I have time to exercise after work and even to blog. I hire people to cut my lawn. Maybe his idea of downtime is going to church, or bowling with friends. Yet, I must, I should be happier, right? Ain’t necessarily so.

I often ask myself, is this it? While I will not get into details, I realize we spend a lot of money in my family trying to make ourselves happier. For example, there is mental illness in our family. We do the modern things to improve the situation. Certain unnamed family members may or may not be on antidepressants and may or may not be talking regularly with therapists. Would we have been happier if we had less choice and opportunity than we do? Was our pursuit of prosperity the very thing that led us to having more unhappiness in our lives? Consequently, is this why my family now needs frequent consultations with mental health experts?

I appear to have all the things by which one measures success and happiness. I have a wife and daughter who love me. I have a job I truly enjoy and which fully engages me. I have a comfortably sized house that is well maintained and keeps appreciating in value. My nest egg grows every year and after talking to my financial adviser last week, I know it will grow even faster in the future. I myself earn more than twice the average national household income. Yet what fixates me is not what I enjoy about life, but those things that really should not matter at all. You might say I spent thirty percent of my time obsessing about the five percent of my life that I feel is out of kilter. I cannot be happy unless I am happy all the time. Otherwise, some part of me remains miserable. Otherwise, my life feels cheapened and not optimized somehow.

Perhaps happiness comes from letting that five percent go. Perhaps happiness is simply a state of mind. Perhaps it comes from the willingly suspending disbelief. Instead, I am fixated on what might happen. If someone earns $12,000 a year, he likely does not have any health insurance. Yet according to this article, he is as happy as I am. Yet for some illogical reason I feel I must be happier because I have health insurance and they probably do not. If they get seriously sick, they are in serious financial straights. They can even die. I am more likely to hang around. So I will be alive to do what? I will still probably do what I do now, and keep spending thirty percent of my time obsessing about the five percent of my life that is not optimized for my personal happiness.

The angels are whispering to me, “To be happy, let it go.” Let go of that five percent. It is beginning to dawn on me that the reason I obsess on the missing five percent is that all my life I have been in a Darwinian struggle for survival. Survival of the fittest is hardwired into my brain. I cannot escape from this pattern because it is integrated into my character the same way my irises have always been blue. However, improving the odds of my survival does not necessarily make me happier. It should make me less anxious. It is more likely to make me neurotic. Perhaps that is the reason my family spend so much money on doctors and therapists. Yet improving our odds of surviving will not keep us from dying in time either. However, there may be some illusionary satisfaction from keeping the wolves outside the gate. The happiest people though seem unconcerned that there may be wolves at the gate.

Yes, it was Paul McCartney who crooned, “Money can’t buy me love”. Moreover, didn’t he just turn 64? Didn’t this song suggest that no one could really love him when he turned 64 because at that age he was old and therefore unlovable? Well, maybe Linda would still love him had she survived. Is it just coincidence then that now at age 64 we find in the news that Paul divorced his baby doll wife? Heather Mills now has a reputed ten million pounds from Sir Paul to help her find happiness somewhere and with someone else. Presumably, her happiness no longer takes the form of spending time with a rich senior citizen.

I do know who is happy though. It does not appear to be Sir Paul, and it is not me at least for a significant chunk of my day (although logically I should be very happy). Whom do I know who is happy? I see him many days pushing a broom. Yet for the life of me, I do not know whether such happiness is worthy of aspiration, or delusional. Survival of the fittest may not actually make me all that much happier, but human history suggests that maybe it is a worthier aspiration.

July 3rd, 2006 at 10:00pm Posted by Mark | Best of Occam's Razor, Philosophy | no comments

Six Figures Ain’t What It Used To Be

Sometimes life’s milestones go almost unnoticed. In filling out the paperwork for my car loan this week and totaling up my income I discovered that my income alone was now just barely in the six figure range.

So why don’t I feel richer?

I always figured that if I were making this kind of money that my life would be a heap more upscale. Maybe I’d be driving a Lamborghini, but if not that at least a Lexus. Instead I have this lovely brand new but modest 2005 Honda Civic Hybrid. This hardly screams midlife-crisis babe-attracting-magnet mobile.

With a six figure income isn’t it time to get a McMansion with a three car garage? We seem content with our modest three bedroom single family home. The McMansions are all over the place in my community. It would not be out of our reach for us to trade up to a grander house. But the truth is I don’t want a McMansion. My income is now in six figures but apparently my neighbors have much deeper pockets. They have the McMansion, three cars in the driveway and a wife who stays at home and drives the children to ballet classes. But not everyone can be an executive vice president. Where do these people get the money? Am I underpaid at $100K a year?

Perhaps I could buy a vacation home, weekend getaway or timeshare condominium. But I don’t want any of them. I don’t want to spend my weekends driving somewhere to have some stolen moments in the country. I don’t want the hassle of maintaining another piece of property. I can hardly keep up the one I have. And I doubt that even on six figures that I could really afford two mortgage payments.

While I no longer struggle from paycheck to paycheck I find that my experience with poverty and struggling to make ends meet for so many years still controls my behavior. I cannot be reckless with money. I largely practice pay as you go. I won’t carry a credit balance. I typically buy used cars and keep them until they are just short of falling apart. (This new car is the exception, but even so we put $10,000 down.) As for style, I have none. I have no sense of fashion. Blue jeans and T-shirts supplied by technology vendors account for much of my wardrobe. My daughter says I need a visit from the Queer Eye for the Straight Guy folks. I have no idea how to be hip. Worse, I have zero desire to be hip. I am comfortable being indistinguishable from the crowd.

Still I have noticed the income creep over the years. A family vacation in Hawaii a few years ago would have been unthinkable at one time. It probably cost us $7000. It was paid for by extra paychecks and by dipping into savings a bit. I hardly noticed the cost. Similarly this year my wife elected to get some cosmetic surgery. The operation cost us $6000 or so. We paid for it out of savings and paid ourselves back within a few months.

Such things are helped by having low housing costs. Our mortgage payments are about $1500 a month. At one time the payment seemed obscene, but now new residents have a hard time renting a decent apartment for that kind of money. We have been fortunate in the timing of our housing decisions.

I spend money in places and in quantities I didn’t before. I give a lot more money to charity not just because I can but because I want to. And I gave thousands of dollars to political candidates and political organizations in the last election. It was too bad I didn’t get a better return on those investments.

So I’m certainly not complaining. Poverty sucked. Some part of me continues to be scared that I will be impoverished again. On some level I realize this is foolish. I have 401Ks, mutual funds and hundreds of thousands of dollars in equity that can be tapped in emergencies. It gets easier to spend money with every large or frivolous purchase. But I still feel the need to horde my money. I pay myself first but I often wonder why. Am I afraid to live the larger life? Or am I simply comfortable living in the trappings of a modest life even though our financial reality suggests more expansive possibilities?

I don’t know. But I often feel I should be more financially savvy. Trading up to a bigger house would make a certain sense at this stage in my life. Perhaps the class of my neighbors would improve (not that I have many problems with my existing neighbors). Perhaps the Rotarians would ask me to join. Perhaps I would feel what it would be like to be “in” or at least a member of the somewhat moneyed crowd.

But overall I sense that passing this particular milestone doesn’t mean that much anymore. There are plenty of other people in my fortunate boat and we are all trading up. This means that prices are going up, which means that my income doesn’t mean as much as I think it does. I’m doing well. I consider myself fortunate. But I still can’t see coming up with $24,000 a year to send my daughter to Sidwell Friends School, something she’d like us to do. I can’t see buying her a car when she gets her license. Although we have money set aside for her education I can’t see her in a preppy private school somewhere when a public university will do just as well. All these things still feel beyond our financial reach, or at least don’t seem prudent.

Perhaps I’ll do it if I ever reach the $200,000 milestone.

November 24th, 2004 at 01:15pm Posted by Mark | Life 2004 | one comment

Economics 101 and Iraq

One of the more useful courses I took in college was Economics 101. Surprisingly, I retained a few nuggets of gold from that course I took some 28 years ago. One nugget was the notion of a sunk cost. For those of you who never took economics, or conveniently forgot about sunk costs after taking the exam, the economic dictum basically says that any money you spent on the past is irrelevant if it no longer meets your current needs. The present matters, not the past. Perhaps it is better stated as: don’t continue to pour more money down a black hole.

The tendency to do so anyhow is very human. You can invest years trying to repair a marriage that cannot be repaired because your spouse has no interest in repairing it. Of course you want to believe it can be repaired. You can build your house on a fault line and keep pouring concrete into the foundation to raise it up again. We want to think, “If I spend just a little more to fix something, it will be fixed right this time.” When the expected result doesn’t happen we spend a little more and a little more, or perhaps tinker along the edges, but the solution we seek continues to fail us in the long term. Hope springs eternal.

The key to making these judgments is to understand when an implemented solution is fundamentally flawed. If you can analyze your approach objectively, you can determine when you have a sunk cost and when you don’t. Once you lose your objectivity though the consequences get dangerous and increasingly costly, and endeavors can turn into pure folly.

Those of us old enough to remember Vietnam remember that the Johnson Administration was going to stop communism from spreading in Indochina no matter what the cost. By 1968 we had over half a million soldiers and airmen in Vietnam. There were over 800,000 men in the South Vietnamese Army too. B-52s were blitzing Hanoi and bombing the Ho Chi Minh trail.

The Bush Administration is engaged on the same sort of myopic thinking. Last night President Bush pulled a rabbit out of his hat. Apparently the $75B he asked for earlier isn’t quite enough to do the job needed in Iraq. But now with another $87B we are going to solve the problem. For $87B we can win the war on terrorism in Iraq, rebuild its infrastructure, and bring peace, security and democracy.

I have of course a few questions that are unlikely to be answered for the Bush Administration:

- Why wasn’t $75B enough?
- Since $75B wasn’t enough how can we trust you when you state that $87B will be enough, given your track record?
- If we spend $87B and the situation has not markedly improved, are we going to spend more money?
- If we spend the money and the situation does not markedly improve, do we have an exit strategy? Or is the strategy to spend whatever it takes in money, lives and time to win this war?
- How do we know the money will be spent wisely?
- If this strategy did not work in Vietnam why are you certain that it will win in Iraq? What is the probability of long term success or failure and what assumptions did you use, if any?
- If you are certain this strategy is going to work, why hasn’t it worked in Afghanistan where similar tactics are being used but have not achieved the desired result?
- Can our military and police force in Iraq truly stop a war on terror if a police and interdiction force can’t stop a drug war which has lasted now for over 30 years?
- Has anyone polled the Iraqi people to see if they want a western style democracy?
- If the Iraqi people democratically voted for us to leave immediately, would we withdraw?
- Given the long history of ethnic and religious conflicts in Iraq, what makes you think in the short term we can do a better job of managing it than Saddam did?

I do know this: the $75B allocated already, unless we get out immediately, is a sunk cost. It’s largely been spent and won’t be coming back. I and future generations will be paying the interest on this money that so far has brought no discernable results except for Saddam Hussein’s overthrow. It hasn’t resulted in the find of weapons of mass destruction. It hasn’t kept the lights on or the water flowing reliably for the citizens of Iraq. It hasn’t ensured public safety; indeed the streets of Iraq are now much more dangerous than before we started this war.

We can’t afford to lose this one, Bush is telling us. We could not afford to lose the Cold War either, but we lost in Vietnam and still won the Cold War. Why is withdrawing or losing this skirmish in the war on terrorism mean we’ve lost the war? Couldn’t it also mean that we could use our resources more effectively somewhere else to win the war on terrorism?

In reality the American people don’t care very much about the people of Iraq. It’s not that we wish bad things to happen to them, it’s just that we don’t really believe that what happens there affects our national security. In reality it is not we (the American people) who cannot afford it to lose in Iraq. Rather it is Bush who cannot lose face and admit he made a mistake and waged a war on false pretenses. This $87B means we are essentially hedging a bet to cover Bush’s ass for his miscalculations and mistakes.

In a way, the money is going into the coffers of his reelection campaign. But let’s not fool ourselves. If Iraq was no threat to our national security before we invaded, it probably isn’t one now. It may turn into one by giving terrorists and people who hate our country an easy way to lash out at us. But if we withdraw, that easy target goes away.

A better example of what awaits us can be seen on the West Bank and the Gaza Strip. For more than 30 years Israel has occupied these Palestinian areas. The more they try to root out terror, the more terror they get back in return. It appears that there is a force greater than the best military in the world. It is the human spirit. Short of being able to read the minds of everyone on the planet, there is no way to tell friend from foe. If sufficient numbers of people are against us then success in Iraq is impossible. In that case we should realize our money was wasted and is a sunk cost. I believe that point has been reached. Any economist worth his salt would say bring our soldiers home.

September 8th, 2003 at 03:15pm Posted by Mark | Politics 2003 | one comment

Things Cost Money!

I have startling news for the Republican Party and fiscal conservatives in general. Things cost money.

I generally vote Democratic and when I mention it to non-Democrats I get this horrified look like “So you are in favor of higher taxes, big government and wasteful spending?” Huh? What? When did I say this? I don’t want to pay one dollar more in taxes than I need to contribute. The difference is that I don’t want society to look like a slum. I’ve made the connection, which apparently a lot of people haven’t, that you get the society you pay for.

There are lots of examples of trying to have your cake and eating it too but I will pick today President Bush’s “No Child Left Behind” initiative. Even I can’t complain about the idea. Why should some poor inner city kid get an inferior education compared to someone here in Fairfax County, Virginia? The law that was passed is more accurately named “Leave no child behind, and make the states pay for it.” In other words, it’s an unfunded mandate. Last I checked almost every state government, including here in Virginia, is running deficits.

The states are starting to cry foul (I wonder what took them so long). Instead of a race to the top, it’s a recipe for failure. Why? Because for the most part states can’t or won’t summon the political will to raise taxes, and with the money remaining most are not going to throw more money automatically into education.

In fact when it comes to education we are a bunch of damned hypocrites. We say we want better teachers and smaller classrooms. When was the last time someone really decided to pay for it? Okay, there is the progressive state of Maryland, largely controlled by the Democrats. They “got” it. They’ve figured out it will cost serious money to leave no child behind and are paying for it. There are no income tax cuts in Maryland. Taxes may even have to be raised.

Pretty much every year, even here in Fairfax County which is renown for its schools, the class sizes increase, the number of trailers increases out in the play ground, teacher’s salaries are kept at or below the cost of living and everyone runs around trying to meet standards of learning benchmarks, teaching to a test instead of imparting valuable skills like critical thinking. This is politically correct “education”.

Here in Fairfax County our air is increasingly bad, our roads are forever more crowded but just recently we rejected an initiative to raise our taxes half a cent to solve some of these problems. It’s not like we’re exactly poor. We have the second highest per capita income in the country.

There is no way I’d become a public school teacher. Would you want to live in Fairfax County, where houses cost $300K on up on maybe $40,000 a year, teach in overcrowded classrooms, spend most of your off the job time doing lesson plans and grading homework, then be held accountable for bratty kids and their ability to score on some politically inspired standardized test? I’m not sure you can rent an apartment for $40,000 a year in this county any more. And yet we must be doing something better than most, which suggests that other school districts are spending far, far less. When it comes to education in general we talk a good talk but fund the schools as if we were Ebenezer Scrooge.

You want low taxes? Move to Angola. I’m serious. There are NO taxes in Angola; there is only anarchy. You may find that there are additional expenses, like hiring your own personal armies to do your shopping (owning a tank might get expensive), and you might have to build your own roads to get where you want to go. But it must be paradise right? No taxes at all! But what is that? You want low or no taxes AND great roads AND great schools AND minimal crime AND clean air AND you want to drive around in smog producing SUVs? This isn’t rocket science, folks. At best you can get two out of three. You won’t get all of them.

So Republicans and fiscal conservatives, stop being such damned hypocrites. Things cost money. If you want these things, pony up the dough. Pay your share. If you don’t, quit your bitching. Home school your brats. Put a fortress around your McMansions and lead your little xenophobic life detached from the real world. But if you value civilization then pay for it. Taxes are not evil. Taxes are the price of living in a civilized society. And apparently they aren’t nearly high enough.

January 3rd, 2003 at 12:48pm Posted by Mark | Best of Occam's Razor, Politics 2003 | one comment